1

The Legacy of a Fractured Eurozone:

the Greek Dra(ch)ma1

John Hatgioannides2, Cass Business School, City University, London

Marika Karanassou3, Queen Mary, University, of London and IZA

Hector Sala4, Universitat Autònoma de Barcelona and IZA

Menelaos G. Karanasos5, Brunel University London

Panagiotis D. Koutroumpis6, Queen Mary, University of London

March 2018

Abstract

This paper addresses neoliberal origins of the acute geoeconomic and social crisis that was

inflicted on Greece since 2010 with the unleashing of the 3 consecutive bailout plans and the

implementation of fierce austerity policies. We further scrutinize the composition of the

soaring Greek debt and most importantly, the unsettling utilization of the troika loans for the

2010-15 period. For the first time in the literature, we provide evidence that the vast bulk of

the loans went overwhelmingly not to benefiting a "profligate" Greek state but to avoiding

the write-downs of bad loans made by reckless creditors (mainly, German and French banks)

to the Greek government and private banks. We propose the temporary adoption of a parallel

currency in the form of government IOUs, together with other drastic measures to reboot the

ailing Greek economy inside the Eurozone.

JEL Classifications: E50, E62, E65, GO1

Keywords: Greek crisis, Eurozone, Neoliberalism, Neoliberal policies, Sovereign Debt,

Austerity, Parallel currency.

1 We are grateful to the Editor and the extensive comments of an anonymous referee which substantially

improved our exposition and analysis. The usual disclaimer applies. 2 Corresponding Author. Faculty of Finance, Cass Business School, City University, 106 Bunhill Row, London

EC1Y 8TZ, UK; tel.: +44 020 7040-8973; email: j.hatgioannides@city.ac.uk. 3 School of Economics and Finance, Queen Mary, University of London, Mile End Road, London E1 4NS, UK;

tel.: +44 020 7882 8822; email: m.karanassou@qmul.ac.uk. 4 Departament d’Economia Aplicada, Universitat Autònoma de Barcelona, Edifici B, 08193 Bellaterra, Spain;

tel: +34-93.581.27.79; email: hector.sala@uab.es. 5

Economics and Finance, Brunel University London, West London UB3 3PH, UK; email:

menelaos.karanasos@brunel.ac.uk. 6 School of Economics and Finance, Queen Mary, University of London, Mile End Road, London E1 4NS, UK;

email: p.koutroumpis@qmul.ac.uk.

2

1. Introduction

A decade since the beginning of the Great Recession, and the acute economic crisis

afflicting the Eurozone countries does not abate. The economic malaises of the neoliberal7

market economy that were exposed by the financial meltdown in 2008 have been amplified

by draconian austerity measures that the "structuralists"8 have imposed in the common

currency area. Fiscal retrenchment programmes were presumed to deal with what has been

commonly framed as a sovereign debt problem. In the process, real GDP in the most deeply

affected countries remained substantially below pre-crisis levels, leading them into a

depression. Real GDP is -23.3% (Greece), -7.1% (Italy), -6.4% (Spain), and -2.9% (Ireland)

below its respective 2008 levels (source: Eurostat 2014). The result is an ever more serious

social and political crisis: Greece and Spain suffer from huge unemployment rates around

20%, while youth unemployment hovers around the 50% mark.

Arguably, macroeconomic indicators have recently improved in countries like Ireland

and Spain (and in the Eurozone as a whole mainly as a result of the European Central Bank’s

(ECB) quantitative easing monetary policies) but, whatever temporary rebound is evidenced

through dry statistics, it is plagued by five, in our view, main characteristics of 21st

century

neoliberal capitalism: (i) Rising economic and social inequality which increases the

marginalisation of large sectors of national populations and concentrates even more forms of

capital within certain geographic regions and among certain groups, a phenomenon of

uneven spatial development (Harvey, 2005); (ii) Increased propensity to crisis and secular

stagnation (as described by A. Hansen, see below) with the explosive financialization of the

capital accumulation process; (iii) Business concentration, hoarding of cash reserves and

lack of productive investment by big companies; (iv) Casualization of the labour force ("Gig"

underclass of labourers, "Uberization", impoverished middle class; and (v) Hollowing-out of

democratic institutions.

The aim of this study is to revisit and re-examine key economic data following the

inception of the Euro for Greece, the undisputed "guinea pig" of the "Alice in Wonderland"

7 For details, see the discussion in Section 2.

8 We refer to as "structuralists" the dominant Eurozone neoliberal policy makers that believe, out of ideological

conviction, that whatever the economic problem, structural reform, deregulation, and fiscal flexibility in

framing the future steps of austerity, will grow ailing economies stronger.

3

economics of austerianism. Given that since 2010, turbo charged fiscal consolidation is being

undersigned by debt fundamentalists through 3 consecutive bailout plans (see Karanasos et

al., 2017, for details) as the prime remedy for the tumultuous state of the Greek economy, a

fresh assessment is needed for its geoeconomic impact and efficacy. Two are our main

contributions.

First, we present new evidence about the composition of the soaring Greek sovereign

liabilities and, crucially, of the unsettling utilization of the "troika" (IMF, European Union,

ECB) loans. We demonstrate that the vast bulk of the loans went overwhelmingly not to

benefiting a "profligate" Greek state but to avoiding the write-downs of bad loans made by

reckless creditors (mainly German and French banks) to the Greek government and Greek

systemic banks. We view this destabilizing conduct by the Eurozone’s economic elites as a

form of what Harvey(2005) terms as ‘accumulation by dispossession’: “By [accumulation of

dispossession] I mean the continuation and proliferation of accumulation practices which

Marx had treated of as ‘primitive’ or `original' during the rise of capitalism. These

include...colonial, neocolonial, and imperial processes of appropriation of assets (including

natural resources)...and usury, the national debt and, most devastating of all the use of the

credit system as a radical means of accumulation by dispossession” (p.159).

Second, we propound a concrete alternative plan with a number of interconnected and

synergistic actions that will alleviate the Greek crisis, will avert the dissolution of the

Eurozone and shake discredited neoliberal beliefs and economic functioning. Our key

proposal is the temporary adoption of a parallel (to the Euro) currency whilst, crucially,

Greece remains formally a Eurozone member. A complementary currency may be pertinent

not only for Greece but for other troubled nations within the Eurozone, foremost Italy, given

the state of its economy and of its ailing banking system.

We acknowledge that the synergistic forces behind the genesis and the unfolding of the

Eurozone crisis are extremely deep-seated ranging from over-accumulation, surplus

absorption, monopolization and the financialization of the capital formation process that

characterize the world economic system to Eurozone specificities.

For the present analysis, we employ Peck et al.’s (2012) understanding of

neoliberalism as market disciplinary regulatory restructuring. Crucially, it is this disciplinary

impulse that, in Polanyi’s model, gives the Euro project its chimerical character, due to the

4

political impossibility of allowing the societies of the member states to be transformed into

heap of ruins (Polanyi (1944[2001], pp.202) by the sanction of hunger (Polanyi (1944[2001],

pp.123), although both testaments are tested to the limit in the case of Greece. The result is an

inevitable coupling of market disciplinary reforms (e.g., the inception of the Euro) to the

growth of financial backstopping institutions which provide state-funded security (e.g.,

European Stability Mechanism (ESM), European Stability Fund (ESF)), in other words an

expansion of big-government finance under the auspices of small-government ideology, in

an escalating cycle of crisis and crisis interventions.

In recent related work, Hatgioannides et al. (2017) addressed in detail the Eurozone’s

woes and the prospect of secular stagnation (see below) in the common currency area by

unravelling (i) the supply-side imbalances that formed the core-periphery economic divide,

and (ii) the necessity of the periphery’s sovereign debt to finance imports from the export-led

core. Since in a monetary union, a member state cannot devalue to boost its exports and put a

brake on its imports, it is the fiscal budget balance that will have to fill up the gap left out by

private and external sectors; hence the explosion of sovereign debt in parts of the periphery

and the need of debt “mutualisation”.

The prevailing view that countries of the core have funded the sovereign debts of the

periphery was thus challenged, and subsequently it was demonstrated that the commonly

held argument that the periphery countries (first and foremost Greece) have lived beyond

their means -due to wages growing beyond what is justified by productivity gains- is in stark

contrast to the trajectories followed by the wage shares. In addition, they provided evidence

that intra-euro mercantilism was forming the salient economic project during the booming

times 2001-2007 of the monetary union.

They further scrutinized the credit flows, the role of FIRE (finance, insurance and real

estate) as a major source of economic stimulus by partially soaking up surplus capital and the

role of the ECB in creating an asymmetric monetary union. During the pre-2008 period, it

was shown that the main booming private enterprise of the recently deemed as troubled

countries of the periphery was a rampant financial sector fuelling a multi-facet credit bubble.

A bubble that was funding the unsustainable purchase of goods from the exporting core and

the explosion in speculative property construction. At the same time, the private sector agents

(banks, insurance companies, pension funds) of the richer and higher saving core, funnelled

5

huge money flows to the poorer periphery. As this investment decision was driven by their

quest for boosting short-term profitability, it had a destabilizing impact on the allocation of

scarce resources at the recipient states. During the ongoing austerity era, the very same

private institutions are reversing former and reckless cross-border investments. The credit

draught in the periphery, the differences in the funding costs of core/periphery states, were

found to be symptoms of the concurrent attempts by surplus countries private creditors to

repatriate the massive opportunistic claims they have accumulated on deficit countries

debtors.

As early as 1938, the leading Keynesian economist in the US Alvin H. Hansen dubbed

the term secular stagnation: According to this theory, the modern developed capitalist

economy has an enormous capacity to save, both because of its corporate structure and

because of the very unequal distribution of personal income. But if adequate profitable

investment opportunities are lacking, this saving potential translates not into real capital

formation and sustained growth but into lowered income, mass unemployment, and chronic

depression, a condition summed up in the term stagnation (see Sweezy and Magdoff

(2009/1987), pp. 30). Secular stagnation might "prove the New Normal".9 With reference to

the world economy, both Summers (2013, ibid) and Krugman (2013, ibid) are adamant that

what is needed is increased spending of all kinds to get the economies moving again, initially

through expanded government expenditure, but with the object of jump-starting private

investment spending.

If, or rather when (in our opinion) should the current disastrous policies perpetuate,

Eurozone goes into stagnation, there are many problems endemic to this block of countries;

most notably, that this is one region of the world where "rules" have triumphed over even

mainstream economic pragmatism (see Stockhammer and Sotiropoulos, 2014), forcing to

pointless cuts in government spending. It is the cobwebbed, yet conflicting, dynamics of

structuralism (see Footnote 2) and an obsession with the "rules" that shape the contradictory

9 See Lawrence Summers (2013). Another leading Neo-Keynesian, Paul Krugman (2013) picked up Summers’

comments arguing that “an economy facing secular stagnation...isn’t just a temporary state of affairs, it's the

norm”. As Magdoff and Foster (2014) point out, “Neither Summers nor Krugman offer a theoretical or

historical explanation for secular stagnation. Instead they focus simply on the liquidity trap in which interest

rates approach zero-making it difficult to stimulate the economy monetarily by further lowering rates”, ibid,

pp.2. In a footnote, they carry on noting that “Hansen’s theory is discussed by Krugman as if it merely

emphasized demographic factors, not issues such as industrial maturity, monopoly and inequality”, ibid ,

footnote 7, pp. 23.

6

and geographically uneven institutionalization of the political project of neoliberal

integration in the Eurozone.

Conceptually, the tendencies toward neoliberalization, financial marketization and,

ultimately, economic integration in the common currency block of countries are conditioned

by a Polyanian ([1944]2001) "double movement". This is driven, on the one hand, by an

overarching laissez faire ideology and the concomitant impulses of market discipline and

pursuit of economic opportunity at the European/global level, and on the other, the pressures

these impulses create for the institutionalized protection of social security and national

sovereignty. As noted by Polanyi ([1944]2001), internal and external, social and national

protectionism [tend] to fuse(pp. 213) Haberly and Wojcik (2017) observed that the latter

"countermovement" aspect of the double movement mentioned above is often less driven by

conscious political opposition to neoliberalization, than an ad-hoc dynamic of elite cognitive

dissonance within the implementation of neoliberalism. For the Eurozone in particular, the

rolling back of state intervention via financial deregulation is paradoxically leading to

increased central intervention (European Union’s Commission in Brussels and other state

funded bodies such as ESM/ ESF) in financial bailouts of countries such as Greece, Portugal

and Ireland and the ECB’s expansion and dominant role in both bailouts and quantitative

easing monetary policies.

The remainder of this paper is organized as follows. Section 2 reflects on the concept of

neoliberalism and sheds light on the dynamics and contradictions of neoliberalization

processes observed in the Eurozone. In Section 3, we evaluate the trajectories of main

macroeconomic indicators for Greece before and, primarily, after the onslaught of the debt

crisis in 2010. In Section 4, we present new evidence about the composition of the Greek debt

and most importantly the utilization of the troika (IMF, European Union and the ECB) loans.

Section 5 outlines our proposals for a temporary resolution of the Greek crisis, notably with

the adoption of a parallel (to the Euro currency), whilst, crucially, Greece remains formally a

Eurozone member. Section 6 reminds the eerie similarity of Greece to that of Germany in the

interwar period. Finally, Section 7 concludes.

7

2. Neoliberalism and Neoliberalization Processes in the Eurozone

Our current phase of capitalism is underpinned by a much used but loosely understood

economic and political philosophy called neoliberalism. Brenner et al. (2010) correctly

observe that neoliberalism “has become something of a rascal concept-promiscuously

pervasive, yet inconsistently defined, empirically imprecise and frequently contested” (pp.

184). At the same time, the ongoing Eurozone’s economic crisis has added still greater

urgency to debates around the polysemic nature of neoliberalism and its internal

contradictions. Divergent interpretations of neoliberalism-its histories, its geographies, its

crisis tendencies and its trajectories-are generating radically divergent diagnoses of the

present geoeconomic conjuncture, the ongoing transformation of regulatory formations at all

spatial scales and the possibilities for alternatives to the market-based economic order (see

Brand and Sekler, 2009, and Peck et al., 2009).

Neoliberalism was first introduced by M. Friedman in Latin America in the 70s and

was subsequently established in the early 80s, in the US during the tenure of President R.

Reagan and in the UK by Prime Minister M. Thatcher. In turn, the Anglo-American

economies at the heart of global finance were treated by the majority of the other mature

economies as a black box of market fundamentalism filled with caricatured liberal and/or

market-based institutions, which were presumed to act as the default template for global

economic restructuring.

Broadly speaking, neoliberalism is a project that reduces all human activities to "homo

economicus", redefines democracy beyond the narrow confines of elections as a kind of

market rationality-and the only criterion to judge our political class by is how successful they

are in "marketizing" human relationships and the commons (pasture land, woodland, water

supply). It is evident that neoliberalism has lately started to undermine the very institutions

with which the capitalist establishment has traditionally been identified- the legal system, the

police, parliament, local government. Under the earlier forms of liberal democracy these

could be counted on to play a moderately autonomous role in tempering capitalism. Under

neoliberalism they are increasingly shaped so that they will not be obstacles to market

priorities, especially when the latter are servile to the interests of big business.

More specifically, in heterodox political economy and within the field of economic

8

geography in particular, there are two key perspectives on neoliberalism10

: The first is a

Marxian perspective which views the ostensible ideological goals of neoliberalism as mostly

a smoke screen for a project of capitalist class power restoration, that sees to rip down

institutional and political barriers to the development of new ones, and full exploitation of

existing investment opportunities. The second perspective is a broadly Polyanian one with

links to institutional regulation school-in particular Veblen’s original ideas of evolutionary

institutional change-and "varieties of capitalism work". Whereas Marxists view the

ideological contradictions and hypocrisies of neoliberalism as evidence that ideology is of

secondary importance to class interests, the Polyanians argue that these contradictions are

largely produced by the dialectic between a genuine elite commitment to the market-oriented

"liberal creed" (like J.M. Keynes, they believe that economic ideas matter), and the practical

constraints, tensions and crises that emerge whenever an attempt is made to remodel an

already existing human society to the dictates of this creed.

Harvey (2005) is arguably the leading exponent of the Marxian tradition.

Neoliberalism, according to Harvey, is the intensification of the influence and dominance of

capital11

; it is the elevation of capitalism, as a mode of production, into an ethic, a set of

political imperatives, and a cultural logic. It is also a project: a project to strengthen, restore,

or, in some cases, constitute anew the power of economic elites. The creation of the Euro as

the shared currency for the majority of the European Union members is, in our view, such a

project. Harvey argues that the global expansion of capital is premised on what he terms

accumulation by dispossession. This concept argues that accumulation under globalisation

continues to expand by dispossessing people of their economic rights and of various forms of

ownership and economic power. It is highly relevant to structural adjustment policies

imposed in the Eurozone such as privatization and the prioritization of bondholder

10

We are very thankful to the detailed, thorough and thought-provoking comments of an anonymous referee.

We are incorporating them freely in this Section. 11

Harvey’s (2005) analysis stems from Marx’s insight about the nature of capital itself. Capital is not simply

money, property, or one economic variable among others. Rather, capital is the organising principle of modern

society. It should be recalled that, in his Grundrisse, Marx explicitly argued that capital is a process that puts

into motion all of the other dimensions of modern economic, political, social and cultural life. It creates the

wage system, influences values, goals, and the ethics of individuals, transforms our relation to nature, to

ourselves, to our community, and constantly seeks to mold state imperatives until they are in harmony with its

own. Neoliberalism is therefore not a new turn in the history of capitalism. It is more simply, and more

perniciously, its intensification, and its resurgence after decades of opposition from the Keynesian welfare state

and from experiments with social democratic and state politics.

9

repayment at the expense of brutal forms of austerity, in particular for highly indebted

countries such as Greece. Accumulation by dispossession also includes ...the conversion of

various forms of property rights (common, collective, state, etc.) into exclusive private

property rights;...commodification of labor power and the suppression of alternative

(indigenous) forms of production and consumption (p.159) and ...the diminution or erasure

of various forms of common property rights (such as state pensions, paid vacations, and

access to education and health care (p.160). The latter observations are highly relevant to

Greece under the 3 consecutive bailout plans as we shall show in Section 3.

There are three particularly important aspects of the second perspective on

neoliberalism.

First is what Polanyi described as the "double movement" in which the market impulse

toward marketization ultimately buckles under the weight of the institutions that protect

society from the market12

. In Polanyi’s ([1944]2001) analysis, Nineteenth Century

capitalism was rooted in four institutions -the liberal state, balance-of-power geopolitics, the

gold standard, and the ideology of the market- with haute finance functioning as a permanent

agency of the most elastic kind, and the myth of the self-regulating economy serving as the

system’s "common matrix". Today’s "common matrix" has plenty of echoes of its

Nineteenth Century forebear, being structured around the historically distinctive intersection

of neoliberalization, financialization and a host of new political-economic geographies such

as the Eurozone. Polanyi noted that the fact that the "self-regulating" market could, by

definition, never be implemented in any sort of pure, unadulterated form in an actually

existing human society meant that proponents of liberalization could always that any

socio-economic problems in existing liberalizing policies were a result of their not yet having

gone far enough due to mainly, self-serving political obstruction by vested interests.

In his original work, Polyani also argued that a commitment to the Gold Standard (see

also Section 6) became, from the mid-19th to early 20th century, the primary ideological

motor of the "double movement", with elites being so obsessed with preserving it as the core

institution of global/liberal-based civilization that they, ironically, constructed a massive

12

In contrast, in a Veblenian "double movement", a predominantly Darwinian evolutionary impulse buckles

under the weight of the institutions that protect the market from society-with society understood broadly to refer

to the entire array of actually existing human limitations and idiosyncrasies. Haberly and Wojcik attempt a very

interesting fusion of both Polyanian and Veblenian "double movements".

10

cobweb of interventionist tools in an effort to salvage it (e.g., mercantilist and protectionist

trade policies, colonial empire-building and elaborate networks of inter-central bank loans)

that ultimately proved to be fundamentally conflict-ridden and unsustainable. As we shall

argue in Section 5, the pretence of irreversibility is what distinguishes a true monetary union

from a fixed-exchange rate system with a shared currency. The recent developments in the

Eurozone and in particular, the stance of the elites of the European Union and the ECB

towards moribund member states such as Greece pause an existential threat to the incumbent

form of monetary union and raise serious doubts about the feasibility of the much aspired

closer economic integration.

Secondly, as noted by Brenner et al. (2010), neoliberalism is also characterized by a

counterintuitive and perverse dynamic whereby its continued expansion is actually fuelled by

its own catastrophic failures.13

Only very recently (in early January 2018), the highest rank

officers of two out of the three "troika" members, such as Jeroen Dijsselbloem (President of

the Eurogroup from 21 January 2013 until 12 January 2018, and President of the Board of

Governors of the European Stability Mechanism (ESM) from 11 February 2013 until 12

January 2018) and Christine Lagarde (Managing Director of the International Monetary

Fund (IMF) since July 2011) publicly acknowledged that the bailout loans for Greece were

ill-designed, unfit to reignite its ailing economy; instead they have created an acute

socioeconomic crisis. The bailout loans, they plainly admitted, were only successful in

rescuing -collapsing at the height of the crisis in 2010- mainly, German and French, private

sector banks (for details see Section 5).

Thirdly, Peck and Theodore (2007) engaged with the "varieties of capitalism" school

which, since its origins in the early 1990s has been consolidated into one of the most

influential strands in comparative and heterodox political economy. They elaborated on the

contradictory dynamics of neoliberal market institutionalization showing that are

"variegated", i.e., interdependent across space between institutionally and politically diverse

processes of market institutionalization occurring within and across multiple countries,

13

Brenner et al. (2010) write “For reasons that deserve more systematic exploration elsewhere, policy failure is

central to the exploratory and experimental modus operandi of neoliberalization processes-it is an important

impetus for their continual reinvention and ever-widening interspatial circulation. Indeed, rather than causing

market-oriented regulatory projects to be abandoned, endemic policy failure has tended to spur further rounds

of reform within broadly neoliberalized political and institutional parameters. Ironically, the chronic

"underperformance" of neoliberal strategies has been a source of forward momentum for the project as a whole”

pp. 209.

11

localities and regions. Lim (2010) applies the variegated capitalism approach to the

international dynamic of institution building and interdependence surrounding the

macroeconomic imbalances between the US and China.

Very pertinent for our present assessment of the economic architecture of the Eurozone

and the ascension of Germany as its supreme engine via what we have called in recent related

work (Hatgioannides et al., 2017) as intra-Eurozone neo-mercantilism, is the critique made

by Peck and Theodore (2007) that while the "varieties" approach has served as a potent foil

against the orthodox globalization thesis, its alternative vision of a bipolar global economy

comprising two competing capitalisms was found by the authors to be wanting.

As Peck and Theodore (2007) observe, in rejecting a monolithic conception of

capitalism, Albert ([1991]1993) identified amidst the global economy’s patchwork

complexity two diverging currents-a boisterous, neoliberal strand epitomized by the US in

the post-Reagan period, pitched against a formidable, but somewhat disarticulated Rhinish

model: With the collapse of communism, it is as if a veil had been suddenly lifted from our

eyes. Capitalism, we can now see, has two faces, two personalities. The neo-American model

is based on individual success and short-term financial gain; the Rhine model, of German

pedigree but with strong Japanese connections, emphasizes collective success, consensus

and long-term concerns. In the last decade or so, it is the Rhine model-unheralded, unsung

and lacking even nominal identity papers-that has sworn itself to be the more efficient of the

two, as well as the more equitable (Albert, ibid, pp.18).

The challenge, in the coming ideological battle, was for European politicians,

especially of Germany, to assert the social and economic superiority of their underrated

system in the face of a rapacious and insidious competitor willing to sacrifice the future for

the present, seizing short-term and selective gains at the expense of the formation of an inner

"Third World" of American-style urban blight on the outskirts of Manchester or Lyons or

Naples (Albert, idid, pp.259-60).

The subsequent neoliberal (neo-American in Albert’s terms) economic ascendancy of

the 1990s and the faltering of the German coordinated market economy (Rhinish in Albert’s

terms) at the same time, bestowed new legitimacy on (ostensibly) free-market forms of

capitalism. A singular world of millennial capitalism, market unification and institutional

convergence seemed to beckon with the creation of the Euro circa 1999. As early as 2003, the

12

German political and economic establishments led by the socialist (of the SPD party)

chancellor Gerhard Schroder pre-emptively unleashed the (in)famous "Agenda 2010" of

structural labour market reforms (which will be subsequently propagated by the

"structuralists" across the entire Eurozone). Deregulation, freeze of nominal wages and

salaries, and the slushing of social security, the indirect wage14

and pensions were the top

priorities. Domestic demand was thus suppressed due to the fall of the living standards for the

majority of the population, and "competitiveness" (the wage-productivity gap in our reading

of the term) was boosted mainly inside the Eurozone. At the same time, German

non-financial corporates (NFCOs) have been the undisputed champions among private firms

of member states on both Return on Capital and Return on Equity measures.15

Figure 1 depicts the falling labour share and rising profitability of NFCOs (Figure 1a),

and the associated trade-balance positions of the German economy with the countries in the

Eurozone periphery (Figures 1b-d).

Figure 1.

Table 1 shows that the trade balance of Germany to the EU15 member states almost

doubled over the early 2001-05 period of the monetary union’s life ratifying Germany’s

neo-mercantilistic avenue for the economic domination of the Eurozone.

Table 1.

At the end of 2017, Germany’s economy is the envy of the Eurozone. Growth hit a

five-year high; a surge in exports produced the biggest trade surplus of the post-war era. The

inception of the Euro together with Agenda 2010-overhaul of the welfare and labour laws-

transformed Germany from the "sick man" of Europe in the 1990s into its economic

powerhouse. The traditional German-style coordinated capitalism has finally succumbed to

the teleology of the neoliberal institutional monoculture for the regulation of economic

affairs.

14

The terms of employment (or ‘indirect wage’) are associated with the existence of a national health system,

state pension, benefits system, the time it takes to re-establish benefits, strings attached to receive benefits,

minimum wage, and progression opportunities. 15

See Hatgioannides et al. (2017) for comprehensive evidence of the profitability of NFCOs across the

Eurozone members.

13

Martin Schulz, leader of the Social Democratic Party (SPD) of Germany since March

2017, the former (between 2012-2017) President of the European Parliament, and a potential

member of a new grand coalition to govern Germany from early 2018, has challenged the

triumphant reading of the state of the German economy, declaring that gains in efficiency

through Agenda 2010 had come at the expense of social solidarity, pledging to make social

justice and robust social security central aims of economic policy. He is addressing

well-founded concerns over the predicament of Germany’s labour market. Despite official

records showing that unemployment is at its lowest level since the reunification of the late

1980s, a rapidly increasing prevalence of fixed-term contracts and a growing proportion of

the workforce earning low wages make Germany similar to the intrinsically unequal

Anglo-Saxon economies. It is a sign of optimism which may herald the dawn of major policy

shifts that the articulation of a victorious and unitary mode of capitalism is challenged by the

emergence of a critical countercurrent (in mainstream politics) in Eurozone’s most puissant

economy.

3. The Impact of Austerity Programmes in Greece

The ailing Greek economy, the first Eurozone member to fall in the spring of 2010

under the troika of lenders’ stranglehold and implement the voodoo economics of

austerianism, is in the midst of a 1930s-scale Great Depression with a cumulative reduction

of its GDP -during 2008 to 2015- around 25% (see Figure 2).

Figure 2.

It is important to note that GDP is a particularly inappropriate measure of the real fall in

economic welfare. Given that the current account balance was minus 15% of GDP in the

third quarter of 2008, and has been in surplus since the second half of 2013, it means that

spending by Greeks on goods and services has fallen by a minimum of 40%.

The cyclically-adjusted fiscal balance improved by 20% of GDP between 2008 and

2014, while government employment fell by 30% between 2009 and 2014. Two

ill-conceived bailout plans (the first in 2010 and the second in 2012) accompanied by

self-defeating economic recipes have resulted in official unemployment of 26% (see Figure

14

3a) and youth unemployment at over 50% (see Figure 3b).

Figure 3.

Figure 4a plots the level of trust that consumers have towards the Greek economy. The

steep downward trend shows that the consumers’ confidence in Greece after 2010 fell

sharply, which had a significantly negative impact on private consumption (see Figure 4b).

Figure 4.

Figure 5 shows the collapse of private sector’s credit flow and foreign direct

investment in Greece since 2010.

Figure 5.

Finally, Figure 6 depicts the self-reported unmet needs for medical examinations (including

all ages, both male and female, as a share of medical visits) and the percentage of the people

that face the risk of poverty and social exclusion (increased from around 28% in 2010 to

more than 35% since 2013), demonstrating the serious social consequences of the austerity

programmes.

Figure 6.

4. The Reality about the Composition and Use of Greek Debt

Exotix (a boutique brokerage that specialises in illiquid markets), reported that the

much heralded spring/summer 2012 Private Sector Involvement Initiative (PSI) which

restructured €200bn of the Greek government bonds debt pile, had still left about €62bn

(approximately 31% of the wilting Greek GDP in 2012) of bonds of varying maturities held

by private investors. Collectively known as the "strip", these bonds (in November 2012) were

trading at an average price of 25 cents on the euro. Interestingly, in response to the "bad" idea

15

of bond buybacks, entertained by Eurozone officials (who wanted to avoid inevitable

decisions on their own loans) on how to tackle Greece’s ominous debt trajectory, hedge funds

were investing in the strip with the expectation of sheer profiteering should a future buyback

be tabled.16

Approximately 8bn Euros was accounted by the "international law" bonds held

by the private sector that have been exempted from the 2012 restructuring, as it could have

triggered a series of lawsuits by the hedge funds in possession.

Greek banks disposed of almost 30bn Euros of "new bonds" in December 2012 in a

buyback scheme agreed with international lenders that reduced the country’s debt by around

20bn Euros, still hold the bulk of the short-term debt, amounting to some 15bn Euros in

Treasury bills, which were rolled over in monthly auctions before even this funding facility

of the Greek state was curtailed by the ECB in 2015 (having reached the upper allowed

threshold). Greece’s four systemic banks are understood to hold 2bn Euros of new bond

issuances and another 4-5bn Euros of new bonds created after the 2012 debt swap. In total,

private sector investors hold around 15% of the country’s debt burden. Those include

investors such as Capital Group that hold restructured debt, and fund managers such as

Carmignac-Gestion that took part in the sale of new debt, as well as investors who held

international law bonds and refused to take part in the 2012 debt swap.

Despite the colossal (as a % of GDP and outstanding debt) restructuring which in

reality destroyed the assets (held in the form of government bonds) of the main pension funds

and eroded the wealth of small to medium treasury bond investors, Greece’s debt burden

miraculously increased and surpassed in 2014 the 180% of the country’s GDP (see Figure 7).

Figure 7.

As of the beginning of 2015, Greece’s estimated €317bn of sovereign liabilities is

overwhelmingly owned to the troika of international lenders (approximately €270bn) with an

approximate breakdown shown in Table 2.

16

The Financial Times (2012, December 18) reported that Third Point “one of the world’s most prominent

hedge funds is sitting on a $500m profit after making a bet that Greece would not be forced to leave the

Eurozone, ...[it] tendered the majority of a $1bn position in Greek government bonds, built up only months

earlier, as part of a landmark debt buyback deal by Athens on Monday [December 17], ... The Greek

government swapped holdings of its own debt for notes issued by one of the Eurozone’s rescue facilities at a

value of 34 cents on the euro. Third Point had scooped up holdings of Greek debt earlier this year for just 17

cents on the euro”.

16

Table 2.

It seems like that since the crisis hit, the rest of the Eurozone and the IMF have been

extraordinarily altruistic to Greece. Was it so? A reality check shows an unsettling utilization

of the troika loans (and own Greek financing, albeit relatively small, through the issuance of

short-term Treasury bills) for the 2010-15 period of two successive, yet ill-conceived, bailout

plans: Out of a total of €254.4bn, the sum of €226.7bn were loans supplied by the Eurozone

and the IMF (about 125% of Greece’s 2015Q1 GDP). The breakdown of where the money

actually went is striking and is shown in Table 3 below:

Table 3.

Clearly, the vast bulk of the loans went overwhelmingly not to benefiting a "profligate"

Greek state17

but to avoiding the write-downs of bad loans by reckless creditors (mainly,

German and French banks) to the Greek government and Greek banks. In a word, money

came in and flowed out again from Greece for bailing out, indirectly through Greek’s state

liabilities, private creditors. We can only ponder as to why the Greek crisis is still profiled as

a debt crisis.

July 2015 seals an immolation of Greece: In exchange of what is called a third

"bailout" (potentially worth €80-85bn)- in reality is the imposition of new debts to pay

existing creditors- the Greek state must hand over €50bn of public assets to an "independent"

privatisation fund. On top of that, more austerity has to be injected into a shrinking economy

and any legislation passed in the Greek parliament that is deemed unsuitable by the

Eurozone’s overlords has to be reversed. At present, outlandish and unconstitutional

additional "contingency measures" worth €3.6bn are asked by IMF in particular to be

triggered in the event that Greece fails to meet its onerous fiscal targets.

A capitulated Greece would be turned into an economic "protectorate", one purred,

where all the decisions would be taken by foreign governments, unelected European Union

bureaucrats and self-styled technocrats. Greece becomes the locus where liberal, progressive

illusions are to be shattered.

17

A mere 11% of the total loans directly financed government activities in a country that does not have access

to international markets since the spring of 2010.

17

5. Proposals for a Temporary Resolution of the Greek Crisis

The imminent question is how to sustain and rebuild the Greek economy, crucially

without exiting the Eurozone; a country that has no access in the markets for raising debt, has

to confront the bailout creditors and abandon their economic illiterate programme for lunatic

fiscal adjustments until viable and sustainable aggreements are reached.18

We are extremely averse to suggestions that Greece exits the Eurozone and reverts to a

national currency, historically the drachma. Such a resolution could have been considered

and assessed back in April 2010, prior to the first bailout plan. At present, and after 6 years of

fierce austerity measures, massive internal devaluation and drop of living standards, exiting

the Eurozone will be just rubbing salt in deep wounds; the whirlwind of such an action, in the

short/medium run, for both the economic and social spheres will undoubtedly be devastating.

Longer run benefits are also very questionable for a relatively closed and distressed economy

such as Greece.

There is another, equally important reason, that we strongly favour that Greece

remains, officially at least, in the Eurozone: The common currency was an outgrowth of

efforts that began in the mid-20th century, as Europe reeled from the carnage of two world

wars. The Euro was not just an economic project that sought to improve standards of living

by increasing the efficiency of resource allocations, pursuing the principles of comparative

advantage, enhancing competition, taking advantage of economies of scale and strengthening

economic stability. More importantly, it was a political project that was supposed to enhance

the political integration of Europe, enabling Europe’s historical diversity to function

effectively and collectively.

It is the neoliberal economic and political elites that are failing the noble intentions of

the founders of the European Union, the common currency area and their citizens. A flawed

architecture was designed, driven by an unwavering faith in monopolistic/oligopolistic

18

Hatgioannides et al. (2017) propose the following actions regarding the re-orientation of the Euro and an

ending to the crisis: (i) Writing-off the debt of ailing member states in excess of the Maastricht criterion of 60%

of their GDP; (ii) Credible and heavy-touch auditing of the so-called SIFIs by a new independent public

pan-Eurozone body that is accountable to both national and European parliaments; (iii) Formal and complete

separation of retail and investment banking along the lines of the Glass-Steagall Act for this part of the banking

industry that managed to recapitalise itself without delving deeply into the public purse, and (iv) Reboot the

ECB and change its mandate (explicit nominal GDP and unemployment rate targets).

18

markets of modern global capitalism , one size-fits all policies, central bank focusing solely

on inflation- as opposed to the mandate of the Federal Reserve in the US, which incorporates

unemployment, growth and stability-. It is not simply that the Eurozone is void of a set of

proper institutions to accommodate Europe’s economic diversity; it is rather that the

structure of the Eurozone, its rules and regulations as they stand, that are not designed to

promote growth, employment and stability for the member states.

Under this diagnosis, we proceed next to address the central question of this paper,

asked above, in a manner that not only will avert the dissolution of the Eurozone but will also

shake discredited neoliberal beliefs and economic functioning.

We propose (i) the adoption of a parallel currency19

, (ii) temporary default on the loans

owed to official creditors but servicing all private loans with the strategic objective to regain

market access in the future, (iii) nationalization of the central bank and the systemic

commercial banks, (iv) partial recapitalization of the (nationalized) commercial banks using

the newly issued currency, and (v) the introduction of capital controls.

We should stress that our five proposals should be envisaged as a singleton and

implemented as a whole, since they will work synergistically in offering credibility and

viability to our alternative plan.

We view the temporary default on the loans owed to official creditors as a rightful and

economically plausible action; it is clear from Table 3 above that only a small fraction of the

debt burden of Greece during the tumultuous post 2010 period was actually used for

servicing the Greek state’s operating needs. Official partners in the bailout programmes such

as the IMF are also pressing for a significant debt relief.

The systemic commercial banks are already recapitalised directly by the Greek

taxpayers to the order of 48.2bn Euros as of the beginning of 2015, see Table 3, and by a

further 12-15bn Euros up to the present, totalling nearly a third of the Greek GDP. Unless one

is (ideologically) convinced for an a priori private business model, formal, albeit temporary,

nationalization of the Greek banking system is duly sanctioned.

We elaborate below on our key proposal and contribution, namely the adoption of a

19

See Munchau (2015). Stiglitz (2015) also points out that an alternative way to exit the crisis might be moving

towards a dual currency circulation, using both the Euro and a "Greek Euro", a currency that would be tradable

only within the country's own banking system. He draws also on the experience of Argentina and the

astonishing resemblances between Greece and Argentina in being choked by austerity, experiencing rising

unemployment, poverty and immense suffering.

19

parallel currency, which may be pertinent not only for Greece but for other troubled nations

within the Eurozone, foremost Italy, given the current state of its economy and of the banking

system. Historically, complementary currencies, especially in areas of high unemployment

or underemployment, were successfully implemented ever since the Great Depression of the

1930s in the US, Canada, Western Europe and elsewhere. (for details, see Lietaer, 2001).

Complementary currencies have proved a key tool in buffering a region from the shocks

caused by the failures and crises in the official money system, as we are evidencing today

within the Eurozone, and have fuelled a cooperative "domestic" economy operating in

parallel with a competitive global economy driven by the official currency, namely the Euro.

In our modern take, the parallel currency would be issued in the form of government

IOUs denominated in Euros at a parity of one-for-one and constitute legal tender inside

Greece. At first IOUs could be used to pay directly the public sector workers and pensioners.

As public fiat, it would be a form of social relationship based upon trust (as indeed,

every currency in the post Bretton Woods era). In order to avert inflationary concerns and

discounting in a possible "black market", the issuance of IOUs will be restricted to service

the monthly payroll and would be collaterised with the stock of Euros deposited in

central/commercial banks of the country. For Greece in particular, the stock of Euros

deposited in commercial banks is in excess of 70bn Euros at present.

Liquidity would be sustained when people and companies with banking accounts use

‘claims on bank deposits’ instead of Euro notes, which they will no longer be able to obtain

from their bank. Such deposit receipts will be the IOUs of the nationalised banking sector,

fully redeemable to Euros at a parity of one-for-one (should the political impasse with the

Eurozone’s creditors ends), and will serve as legal tender as well.

Once a parallel currency is created, the (nationalized) central bank has also to avert

hoarding. Every time someone hoards currency, by definition, its lack of circulation deprives

other people of being able to perform transactions. The more sophisticated forms of

complementary currency of the 1930s included a circulation incentive feature recommended

by Silvio Gesell.20

He proposed a "stamp scrip" mechanism; the core idea was to encourage

20

In 1891, Silvio Gesell described the velocity of money as a decisive factor in determining the level of prices,

preparing the ground for Irving Fisher's celebrated work of the 1920s. Two Nobel Prize winners in economics,

Maurice Allais and Lawrence Klein have joined in the earlier praise by Keynes and Fisher of Gesell's

contributions in monetary economics. (see Lietaer, 2001).

20

people and companies to circulate the money through an anti-hoarding fee (technically called

"demurrage", a word dating back to the railroads’ practice of charging a fee for leaving a

railroad car inactive). The back of each note, or deposit receipt in our scheme, typically had

12 boxes (one for each month) where an official stamp could be affixed. Any bill, to remain

valid, had to have its stamps up to date.

What will be the impact on the Greek economy’s external position and most

importantly on vital imports of oil/gas and pharmaceutical products? Manageable, since

unlike the small economies of northern Europe, Greece is a relatively closed economy; about

three quarters of its GDP is domestic. Of the quarter that is not, most comes from tourism

(approximately 18% of Greek GDP in 2014) which will also bring into the country valuable

Euros and other foreign currency to finance the vital imports paid in the official Euro

currency.21

Such an unorthodox scheme, however mountainous and courageous to implement, will

cushion the Greek economy against a total collapse, avert further capitulation together with

the perils of internal devaluation and shake the Eurozone, and the EU by and large, to its

foundations.

There is little doubt that the wrath of the official creditors will follow; most likely than

not, the ECB that supervises Greek banks, would view the government IOU’s as "Mickey

Mouse" money, cut off their liquidity through the Emergency Liquidity Assistance (ELA)

mechanism and potentially revoke their licences.

The irony and tragedy though is that at the end of June 2015 capital controls were in

place in Greece, commercial banks and the stock exchange were closed, citizens could only

withdraw up to €60 per day, all without the adoption of a parallel currency, just because the

ECB did (temporarily) freeze the ELA!

During a historic weekend in the 11th and 12th of July 2015, Wolfang Schauble, the

German finance minister, insisted on 5-year Greek exit from the Eurozone, a "timeout" as he

called it, that could perhaps be a better way for Greece than the proposed €86bn bailout

package. In reality, the most powerful member state pushes for the expulsion of another,

tormented one. In doing so, creditor nations reverted to the nationalist European power

21

Euros will be exchangeable to IOUs at a parity of one-for-one and other foreign currency at market rates.

Tourists will be able to exchange any unwanted IOUs to their imported currency upon departure from Greece.

21

struggles of the early 20th century; they demolished the idea of a monetary union as the

stepping stone towards a democratic fiscal and political union.

The pretence of irreversibility is what distinguishes a true monetary union from a

fixed-exchange rate system with a shared currency. The coup of the 11/12th July 2015

demoted the Eurozone into the latter system, held together by the threat of absolute

destitution for those who challenge the prevailing order.

6. Déjà Vu?

The situation in the Eurozone today bears an eerie similarity to that of Europe in the

interwar period, especially when the ruling elites of the creditor countries are trapped in

similar orthodoxies to those of the post-WWI years. Ironically, Germany was then in a

similar position to that of the periphery countries, Greece in particular. It was weighted down

with its government debt because of the brutal reparations imposed at Versailles; its banking

system was undercapitalised as the result of the hyperinflation of the early 1920s, and worse,

it had become dependent on foreign borrowing at punitive rates. Germany was locked into

the absolutism of the gold standard, which it dared not tamper with for fear of provoking a

confidence crisis. When the Great Depression hit and private markets shut down, Germany

had no choice but to impose bestial austerity with unemployment rising to 35% and populism

surging.

Like today, in the beginning of the 1930s there was one major economy bestowed with

prolonged large current account surpluses and low unemployment. France was deemed to act

as the locomotive of growth for the rest of the continental Europe.22

Beggar-thy-neighbour

policies were framing the mind-set of the economic rulers in France who were (i) refusing to

accept responsibility of their version of mercantilism and its dire effects in the proximity of

Europe, and (ii) in sheer denial of the necessity of expansionary policies and direct lending to

Germany, fearing that they would be throwing good money after bad. The effect of such an

opportunistic and short-sighted French policy was to herald the enthronement of a populist

22

France returned to the gold standard in 1928 - by 1932 French gold had risen from 12% to 28% of the world

reserves. Notably, when Greece required financial assistance to overcome the dire straits of that period, the

French delegate advocated closing schools and cutting the salaries of public employees by 20 percent

(Bloomberg, 2012).

22

totalitarian regime that steered the world into the savagery and traumas of WWII.23

John Maynard Keynes’s prophetic work, ‘The Economic Consequences of the Peace’

([1920]2012), was ignored by the powerhouses of the 1920s and 1930s. In his capacity as the

official representative of the British Treasury at the Paris Peace Conference in 1919, J. M.

Keynes felt compelled to resign when it became clear to him that there was no hope for

substantial modifications in the draft Terms of Peace. In his diatribe, he lays the ground of his

objection to the Treaty, and dedicates his book to the formation of the general opinion of the

future (ib., p.77). The following extract is revealing.

“...with every one owing every one else immense sums of money. Germany owes a

large sum to the Allies; the Allies owe a large sum to Great Britain; and Great Britain owes a

large sum to the United States. The holders of war loan in every country are owed a large sum

by the State; and the State in its turn is owed a large sum by these and other taxpayers. The

whole position is in the highest degree artificial, misleading, and vexatious. We shall never

be able to move again, unless we can free our limbs from these paper shackles. A general

bonfire is so great a necessity that unless we can make of it an orderly and good-tempered

affair...it will, when it comes at last, grow into a conflagration that may destroy much else as

well” (ib., p.73). How pertinent and topical for the current malaises of the Eurozone is his

nearly 100 years old conviction for a collective reordering of debts and the necessity for

adopting a new economic paradigm.

7. Conclusions

Economic convergence together with shared and inclusive growth were perceived as

the intrinsic features of a ‘brave new world’ in the Eurozone. Within a decade of its creation

and in the aftermath of the Great Recession, fiscal retrenchment has being undersigned as the

sole recipe for the economic survival of the union. The Eurozone at present, given its marked

23

Mouré’s (2002) study is enlightening: ...the rhetoric of the gold standard, with its claims for automatic

adjustment and a natural regulation of prices and external balance, is argued to have contributed significantly to

misperceptions of the economic problems of the inter-war period, producing miss-prescriptions in order to

resolve them. In this sense, gold standard rhetoric misled inter-war policy, with the Great Depression of the

1930s part of the price paid for the gold standard illusion (ib., p.15). The point made by Mouré is that even if a

structurally flawed gold standard system pushed inter-war economies towards major slumps (as Eichengreen,

1995, argues in the ‘Golden Fetters’ analysis), policy prescriptions played a crucial role in the timing and

severity of the depression.

23

imbalances and asymmetric economic performance of its member states since its creation,

reminisces more a fixed exchange rate area with a shared currency than a true monetary

union with a common currency.

This paper addressed the flawed neoliberal economics of the architecture behind the

bailout plans for Greece and the acute geoeconomic impact of a series of fierce austerity

programmes. We elaborated on the relevance for explaining the Eurozone's woes in general

and Greece's perilous condition in particular, of the two key perspectives on neoliberalism in

heterodox political economy and within the field of economic geography, namely the

Marxian one and the broadly Polyanian one. We employed Peck, Theodore, and Brenner's

(2012) understanding of neoliberalism as market disciplinary regulatory restructuring. We

corroborated to the argument that it is this disciplinary impulse that, in Polanyi's model, gives

the Euro project its chimerical character, due to the political impossibility of allowing the

societies of the member states to be "transformed into heap of ruins" (Polanyi (1944[2001],

p.202) by the "sanction of hunger" (Polanyi (1944[2001], p.123), although both testaments,

as we demonstrated, are tested to the limit in the case of Greece. The end result is an

inevitable coupling of market disciplinary reforms (e.g., the inception of the Euro) to the

growth of financial backstopping institutions which provide state-funded security (e.g.,

European Stability Mechanism (ESM), European Stability Fund (ESF)), in other words an

expansion of big-government finance under the auspices of small-government ideology, in

an escalating cycle of crisis and crisis interventions. We further attested to the observation

made by Brenner, Peck and Theodore (2010) that neoliberalism is also characterized by a

counterintuitive and perverse dynamic whereby its continued expansion is actually fuelled by

its own catastrophic failures.

We proceeded by documenting, for the first time in the literature, that the composition

of the soaring Greek debt and most importantly its use was not to benefiting a "profligate"

Greek state but rather overwhelmingly to avoiding the write-downs of bad loans made by

reckless creditors (mainly, German and French banks) to the Greek government and to the

Greek systemic banks. We viewed this destabilizing conduct by the Eurozone's economic

elites as a form of what Harvey (2005) called "accumulation by dispossession". We finally

offered our proposals for a temporary resolution of the Greek drama, whilst Greece officially

stays in the Eurozone, primarily via the adoption of a parallel currency.

24

A credible and comprehensive "Plan B" of a complementary currency-along with the

Euro-together with firm demands for legitimate substantial write-offs of public debt (the

Maastricht criterion points to 60% sovereign debt as a fraction of GDP) for ailing member

states may (i) avert the disintegration of the Eurozone and, ultimately the end of the Euro

(similar to the Gold standard), (ii) re-orientate economic policies away from the

conflict-ridden, unsustainable and perverse dynamics of neoliberalism whereby its continued

expansion is actually fuelled but its own catastrophic failures, and (iii) halt the alarming

ascendancy of anti-Euro/EU populism and its copious rhetoric of attributing the

socioeconomic malices of large scale inequality and unemployment/casualization of the

labour force on intra- Euroland/EU immigration from poorer to richer countries rather than

on the malevolent form of contemporary capitalism.

Dealing with the fallacy of composition, where the collective austerity programmes

and deleveraging of the private sector together with unconventional monetary policies such

as quantitative easing are the roadmap to rescue the Eurozone as a whole, and Greece in

particular, from its macroeconomic downhill, self-defeating internal devaluations and

disintegration, the views of two of the most prominent scholars sitting on different ends of

the economic spectrum are compelling.

On the liberal side, the 1930s Chicago School economist Henry C. Simons argued that

“For the moment, however, attention must be focused on the task of escaping from the

present affliction of extreme unemployment and underproduction. Unless the immediate

crisis can be dealt with, there is no sense in talking about long-run policy. ... consequently,

main reliance must be placed on "reflationary" government spending. ... Inflationary fiscal

policy is dangerous, to be sure - but not so dangerous as the alternatives. …Measures of this

kind must be undertaken, merely to keep running a system which banking and monopoly

have brought to its present plight” (Simons, [1934]1948, p.74). On the Keynesian side, John

Maynard Keynes ([1920]2012) policy recommendations for a collective reordering of debts

and re-orientation of the economic mind-set were ignored by the powerhouses of the 1920s

and 1930s.

References

Albert, M. ([1991]1993): Capitalism against Capitalism, London: Whurr.

Bloomberg (2012):

25

www.bloomberg.com/news/2012-06-01/history-offers-ugly-precedent-for-greek-euro-e

xit.html.

Brand, U., and N. Sekler (2009): “Postneoliberalism: A Beginning Debate”, Development

Dialogue, 51, pp. 5-211.

Brenner, N., Peck, J., and Theodore, N. (2010): “Variegated neoliberalization: geographies,

modalities, pathways”, Global Networks, 10(2), pp. 182-222.

Eichengreen, B. (1995): Golden Fetters: The Gold Standard and the Great Depression,

1919-1939: Gold Standard and the Great Depression, 1919-39, Oxford University Press.

Haberly, D., and Wojcik, D. (2017) Earth incorporated: centralization and variegation in the

global company network. Economic Geography, 93(3), pp. 241-266.

Harvey, D. (2005) A Brief History of Neoliberalism. Oxford: Oxford University Press.

Hatgioannides, J., M. Karanassou, and H. Sala (2017a): “Eurozone: A Neoliberal Project of

Flawed Economics”, unpublished manuscript,

http://www.econ.qmul.ac.uk/media/econ/documents/eurozone_2017-june.pdf.

Karanasos, M., P.D. Koutroumpis, J. Hatgioannides, M. Karanassou, and H. Sala (2017b):

Seven Years of Austerity and the Greek Dra(ch)ma: Three Economists’ Views and a

Comment, Ch. 6, pp. 117-156, in I. Bournakis, C. Soukis, D.K. Christopoulos, and T.

Palivos (eds): Political Economy Perspectives on the Greek Crisis, Palgrave-Macmillan.

Keynes, J.M. ([1920]2012): The Economic Consequences of the Peace, Emereo Publishing.

Krugman, P. (2013): Secular Stagnation, Coalminers, Bubbles, and Larry Summers, New

York Times blog (November 16, 2013, http://krugman.blogs.ny-times.com).

Lietaer, B. (2001): The Future of Money, Century, The Random House Group Limited.

Lim, K. F. (2010) On China’s growing geo-economic influence and the evolution of

variegated capitalism, Geoforum, 41(5), pp. 677-688.

Magdoff, F., and J.B. Foster (2014): Stagnation and Financialization, Monthly Review, 66

(1), pp 1-24.

Mouré, K. (2002): The Gold Standard Illusion: France, the Bank of France, and the

International Gold Standard, 1914-1939, Oxford University Press.

Munchau, W. (2015): Athens must Stand Firm against Eurozone's Failed Policies, Financial

Times, February 15, 2015, http://ft.com.

Peck, J., and N. Theodore (2007): Variegated capitalism, Progress in Human Geography,

31(6), pp. 731-772.

Peck, J., N. Theodore, and N. Brenner (2009): “Postneoliberalism and its Malcontents”,

Antipode, 41(1), pp. 94-116.

Peck, J., N. Theodore, and N. Brenner (2012): “Neoliberalism Resurgent? Market Rule after

the Great Recession”, South Atlantic Quarterly, 111 (2), pp.265-288.

Polanyi, K. (1944): The Great Transformation: The Political and Economic Origins of our

Time, Beacon Press, Boston.

Simons, H. C. ([1934]1948): Economic Policy for a Free Society, Allen & Unwin, London.

Stiglitz, J.E. (2015): Seatedly Wrong Economic Thinking is Killing Greece, Institute for

New Economic Thinking.

26

Stockhammer, E. and Sotiropoulos, D.P. (2014): “Rebalancing the Euro Area: The Costs of

Internal Devaluation”, Review of Political Economy, 26, pp. 210-233.

Summers, L. (2013): Why Stagnation Might Prove to be the New Normal, Financial Times,

December 5, 2013, http://ft.com.

Sweezy, P. M., and H. Magdoff (2009/1987): Economic History as it Happened, Volume IV,

Monthly Review Press.